US-UK Trade Deal Expected Today As Trump Teases ‘Major’ Agreement
18:37 Share

You're listening to an iHeart Podcast. When you have bars in the sky, onboard showers, and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations, and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for help.

Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com. There's no business like small business. Hiscox Small Business Insurance. Bloomberg Audio Studios. Podcasts. Radio. News.

This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Thursday, the 8th of May in London. I'm Stephen Carroll, coming up today. Bloomberg understands that a UK-US trade agreement will be announced by President Trump later today. The possibility of a deal could hand British Prime Minister Keir Starmer a political win, but the devil will be in the details.

Plus, threading the needle on Threadneedle Street, the Bank of England prepares to cut interest rates as a potential tariff deal adds complexity to the inflation outlook.

Let's start with a roundup of our top stories. US President Donald Trump is expected to announce a trade agreement with the UK later today. Details of the agreement remain unclear, but it is believed to be a framework deal that could serve as a starting point for further negotiations. Trump hinted at the announcement in a social media post on Wednesday night, saying he would hold an Oval Office news conference to discuss a major trade deal with representatives of a, quote, big and highly respected company.

country. The New York Times first reported the deal would be with the UK, with sources later confirming the prospect to Bloomberg. Speaking last month when President Trump announced his first global tariffs, Prime Minister Keir Starmer said getting a deal was his plan. Nobody wins in a trade war. That is not in our national interest. We have a fair and balanced trade relationship with the US. Negotiations on an economic prosperity deal

one that strengthens our existing trading relationship, they continue and we will fight for the best deal for Britain.

The pound has strengthened and stock futures have risen after those reports emerged. Investors will be watching closely to see the extent to which Trump is willing to backtrack from his sweeping tariffs. The UK has been pushing to strike a deal with Donald Trump to shield British industry from tariffs, including 25% duties on steel and car exports. Keir Starmer's government has also been worried about the tariffs the US may impose on the pharmaceutical sector and the British film industry.

A key sticking point for the US is Britain's 2% digital services tax on revenues from UK users of platforms like Google, Meta and Amazon. The tax is unpopular in Washington and UK ministers have been weighing whether to cut or scrap it in a bid to secure an agreement. A deal with the US would be a welcome boost for Keir Starmer's government here, but as Ewan Potts explains, the detail will be all important.

A deal with the United States has long been the holy grail of UK trade policy. Imports from and exports to the world's biggest economy total more than $300 billion and account for £1 in six of all UK trade. But politically, a deal has always been fraught with risk, with many fearing a lowering of food standards leading to the imports of American hormone-treated beef...

and chlorine-washed chicken. US health care companies have also long pushed for fuller access to the UK market, causing concern for many in Starmer's own party. And if the PM's expecting unqualified support from those in other parties, well, the fiery pushback to the India trade deal should serve as something of a warning. In London, I'm Ewan Potts, Bloomberg Radio.

The prospect of a potential economic and political win for the UK government comes as a new forecast suggests that Chancellor Rachel Reeves will miss her fiscal rules by tens of billions of pounds in the upcoming autumn budget. According to the National Institute of Economic and Social Research, Reeves is projected to fall £57 billion short of

of meeting her primary fiscal stability rule and is nearly £30 billion short on her investment rule. The prominent economic think tank warns that the resulting fiscal black hole will leave the government with little choice but to raise taxes or cut spending in the year ahead, with Reeves facing what it calls difficult choices come next.

The autumn or the uncertain fiscal backdrop comes as the Bank of England is widely expected to cut interest rates by a quarter percentage point later today. With more, here's Bloomberg's Chris Pitt. All 32 economists surveyed by Bloomberg anticipate the policymakers will lower the benchmark rate by 25 basis points to 4.25%.

Markets are also pricing in a quarter-point reduction as a near certainty, with strong odds of another cut when policymakers reconvene next month. What remains less certain is the longer-term path. The potential for a UK-US agreement on reducing tariffs

could further complicate the inflation outlook just as the bank prepares to unveil its first full assessment of the impact of President Trump's trade levies. In London, Christopher Pitt, Bloomberg Radio.

Officials voted unanimously yesterday to keep borrowing costs unchanged for a third straight meeting. Speaking after the decision, Powell warned that the Trump administration tariffs could lead to higher inflation and unemployment. Near-term measures of inflation expectations have moved up as reflected in both market and survey-based measures.

Survey respondents, including consumers, businesses and professional forecasters, point to tariffs as the driving factor. The Federal Reserve's Jerome Powell speaking there. Several officials have signaled they would not support lowering interest rates preemptively to protect against a slowing economy. Meanwhile, President Donald Trump has repeatedly called on the central bank to

cut borrowing costs immediately. Now, President Trump is planning to rescind Biden-era US AI chip curbs in a bid to revise semiconductor trade restrictions. Bloomberg understands the existing measures have been heavily criticised by major tech companies and foreign governments. The repeal yet to be finalised

aims to abolish the tiered system created to regulate chip exports from NVIDIA and other firms. Our senior tech editor Michael Shepherd says the decision is a win for big tech. It's a win for NVIDIA, which has pressed for a total repeal of these chips curves. It's known as the AI diffusion rule, and it really has caused a lot of consternation in the industry because they see it as something that will

have the perverse effect of throwing countries and their companies into China's arms, seeking access to advanced AI technology. Bloomberg's Michael Shepard speaking there. Sources say the Trump administration won't enforce the curb known as the AI diffusion rule when it takes effect online.

on May 15th. And those are your top stories on the markets. The pound is trading at the moment a quarter of 1% stronger against the dollar. $1.3325 is the Bloomberg Dollar Spot Index is flat, driven by some of those trade headlines. We're looking at FTSE 100 futures up by 0.8% of 1%. Eurostox 50 futures are 0.9% higher on Wall Street. S&P E-minis are up by 0.8% and Nasdaq futures are up by 0.1%.

1.1%. This as the 10-year Treasury yield is up three basis points to 4.3%. In a moment, we'll have full coverage of the expected US-UK trade deal due to be announced later today. But just a word first on a transatlantic deal of a different kind, a British-made watch that's become a prized possession of one of the biggest names in American finance.

In his latest Watch Club newsletter, Bloomberg Pursuits editor Chris Rovzar is speaking to Pershing Square founder Bill Ackman. And it turns out that he owns a particularly important timepiece to those in the know. It's Roger Smith's pocket watch number two, the watch that started the legendary watchmaker's career, making pieces which can sell for millions of dollars at auction now. And Chris has a great summary of that story in his newsletter, plus some pictures of

the beautiful craftsmanship in that pocket watch, which Ackman bought for $4.9 million in 2023.

Now, Ackman tried to get Roger Smith's first watch, which has an even more interesting story about how it led to that man's particular success. You can read the details in the Watch Club newsletter at Bloomberg.com slash newsletters. OK, well, let's dig into our top story then. Donald Trump going to announce a trade deal with the UK later today, according to Bloomberg sources. Charlie Wells is here with some more details for us. First of what we've heard afterwards.

out of the U.S. Charlie, good morning. What do we know then about what's coming in this announcement? Stephen, so the details so far are hazy, but we can definitely view this as a win for both the U.S. and the U.K. If you want to start with the U.S., you know, the White House certainly needs an off-ramp as these trade tensions ratchet up.

up. Trump's selling point to American voters had been his stewardship for the American economy. And we're seeing in polling numbers that trend down and not just on that broader economic point, but also on the issue of tariffs. Americans having a more negative view in a lot of this polling. For the UK, you know, the country has been searching for a trade deal since Brexit. Starmer, of course, announced this week a major trade deal with India. And this just kind of builds on that story there. But as far as specifics, we don't have a lot yet. But

what we know about where things stand right now. You know, the U.S. is the U.K.'s largest single export market. The U.K. is subject to that 10% global baseline that Trump announced, as well as a lot of these sectoral tariffs, that 25% tariff on steel and autos, and then this looming threat of pharma tariffs. So I think the big question is, how would a potential deal change that dynamic? Yeah, and indeed, of course,

trade deals normally take many years to negotiate as well. So the prospect of what we will get will be very interesting to see what detail or how much detail there will be or what this perhaps sets the stage for further negotiations down the line. Where does the power lie in Washington in this as well? What can the White House do? Where does Congress get involved in the process as we go forward? So, you know, that has been incredibly hazy as well, right? There has been so much coming from the executive branch. And I think a

big question has been, you know, how much power does the president have versus the legislative branch? And I think, you know, there have been concerns on the Democratic side about this happening. And so I think, you know, this is one of the questions where you can announce, say, a top line deal between

between countries, but then the specifics just take so long to hammer out. We know that the U.S. and the U.K. have formally been talking about a trade deal since 2020. And I think one concern, you know, we're seeing a lot of optimism in the market right now. But as that starts to digest, as the fact that these deals take so long, that this potential one has, you know, been in the works for a very long time, that could dampen some of the positivity. Yeah.

What about the prospect beyond the UK then? Could this be, as it would be the first, a template for deals to come for other countries down the line? Stephen, I think that's why there is a lot of optimism we're seeing across the globe right now. The fact that, you know, this could provide an off-ramp, not just for the US and the UK, and in a lot of ways...

that relationship has been strong. We knew in those initial tariffs the UK was targeted much less than other countries. But yes, this could provide something of a framework, right? A starting point that other countries could use that could signal, you know, an end to a lot of the uncertainty that we're seeing because we have an idea of a way forward. Okay, Charlie Wells, thank you very much.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. Trading shouldn't have barriers. When Robinhood started, it was built to make trading more accessible.

Thank you.

with powerful charts, including custom intervals down to the tick, and over 80 indicators and drawing tools. Trade all of your favorite assets, including popular stocks and ETFs, all in one place. Take your trading to the next level by customizing your layout in seconds and even enter and exit positions in one tap, right from the chart, with up to eight charts per layout. The future of trading is fast, powerful, and precise. Experience it now on Robinhood Legend.

Sign up today. Investing is risky. Robinhood Financial LLC, member SIPC, is a registered broker dealer. Other fees may apply. Well, an agreement that would lower US tariffs on UK imports would be a big win for the British government, as Charlie was saying. It could also bring some good economic news on a day when we're expecting the Bank of England to cut interest rates. Let's bring in our UK politics supporter, James Wolcock, and our UK correspondent, Lizzie Burden, who's covering the Bank of England decision today as well. James, I want to start with you.

Charlie, pointed to some of the strength of the relationship or the history between the UK and the US there, but how significant would it be for the UK to be first with a deal on trade? It would be a genuine coup for Prime Minister Keir Starmer, and one he would hold over all opposition parties for the duration of his prime ministership. I mean, look...

Back in the Brexit referendum, even before any referendum was voted on, people were talking up a US-UK trade deal. Theresa May in 2018 went to Trump to go and try and get one signed. Boris Johnson went again, went to Biden. These negotiations continued all through 2020, and then it faded.

And then we had COVID. And then by the time of Rishi Sunak and this trust, they were just talks of sort of odd deals with the odd US states. So to go from that to having a deal be back on the table and potentially having one there, that would validate Starmer's approach to how he's conducting negotiations. And to an extent, five years after the UK left the EU gives Brexiteers some backing as well in terms of being able to negotiate deals.

with the US outside of the EU. Okay, so there's plenty of positives to focus on, but what could be the sensitive issues at play? We don't know, as Charlie was outlining, what the details of the agreement will contain, but there are some hot-button issues that could come up in that that perhaps might give the opposition some food for criticism. Yes, I mean, as Charlie was saying, we're quite likely to get what's called a head-of-terms agreement, according to the press speculation, which is where you get a preliminary deal rather than the full thing. So the question then is, how

How long will a full fat deal take to negotiate and when will it take effect? The key areas, though, are will this base 10% tariff that's been applied globally be rolled back in any way, shape or form? And then we have seen reporting in previous weeks that we're likely some sort of movement on steel and cars, both which face 25% tariffs.

Let's see what happens with pharmaceuticals, which is another key area, especially for the UK with big pharma giants. Now, the political hot topics for the UK, at least, are the NHS, any talk about healthcare or privatised healthcare, farmers and agriculture, where there have been big fears around chlorinated chicken, but also farmers have been hit by the UK Labour government last year, so any further pain for them would be politically difficult.

And migration, which as we saw with the UK-India deal just this week, it's a very hot topic. So any changes there may get picked up by rival parties. So some of the political strands at play here as well. Let's think about the economics then with you, Lizzie Burden. A trade deal that lessens the impact of tariffs, surely good news for the Bank of England. How worried have policymakers been about this issue? Really worried, Stephen, because today we were expecting to get the Trump cut.

from the Bank of England because of this growing consensus that the tariff war was going to weigh on UK growth and weigh on UK inflation as well. But

the expectation of a deal throws a spanner in the works about the path ahead for rates because we were expecting that the signalling around the decision today was going to be potentially very, very dovish. We could have had a vote split with more than one member going for a jumbo cut, not just Swati Dhingra, the Archduv, but maybe even Deputy Governor Dave Ramsden and Alan Taylor as well, the newest member of the Monetary Policy Committee. We were expecting maybe the guidance around the decision would be

dovish as well. At the moment, they say that the path ahead for rates is gradual and careful. Careful because they wanted to assess the impact of Trump's trade war. And if that had been dropped, it would suggest that the balance of risks was tilted to a slowdown in growth. And

not inflation rising. And if they took away gradual, it would suggest that maybe a June cut was on the table as well. And that'd be the first back-to-back rate cut since COVID and before that, the financial crisis. But this changes things.

Liz, I'm going to ask you an impossible question, given that we don't know what's going to be in this announcement later on. But what potentially could a trade deal with the US do for Britain's economic trajectory? We know that, for example, there are plenty of fiscal challenges facing the Chancellor which are to do with

slowing growth. Well, let me pick up where James left off. We don't know what the terms of this deal will be, but we do know that Prime Minister Keir Starmer has been focused on mitigating those 25% steel and car tariffs. It may be that the UK still faces this 10% baseline tariff, but even

even if they were successful on those fronts, the UK would still be impacted by global lower demand, oil prices lower. That's disinflationary. You don't know what they're going to achieve on US-China talks at this weekend and beyond. So, it may still be that the UK is flooded with cheap goods, as may be the rest of Europe. That would be disinflationary. And we've still got a stronger pound. So,

There are lots to factor in, as well as the fact, which is hopeful, that this trade deal, if we get one, opens the door to more trade deals, lowering the impact of that tariff war overall. Okay. And we, of course, look ahead to, in the short term, something we do know about, which is the Bank of England decision is happening at 12.02 today. And we'll, of course, have full coverage across Bloomberg. James, a final thought from you. This would be an agreement coming after the India trade deal announced just a couple of days ago.

Is this going to help broadly the government to convince voters that they are making progress on their plan to grow the UK economy, which we know is this big and main priority that they have? I mean, to state the obvious, Stephen, voters don't look at trade deals when they go to the polls. They look at how much things are on the shelves. They look at how they feel about their quality of life. And that's why what Lizzie was saying is so important in terms of global demand is

Imagine a world, for example, where this trade deal creates big economic growth, but then broadly the UK still suffers from a high inflation, low growth global picture. Do people feel better off? So that's the challenge that Keir Starmer faces coming into today in communicating the benefits of this deal and any gains from it.

It's not enough for the average voter just to have the great economic headlines, which are good economic news and potentially the good print sort of media noise around this. It also has to translate to quite literally the penny in your pocket and that kind of very sort of retail politics side. So that will be for him, I think, the key judge of political success, how this deal is then sold to the general public.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hepke. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak Europe.

Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com.

There's no business like small business. Hiscox Small Business Insurance. Time is precious, and so are our pets. So time with our pets is extra precious. That's why we started Dutch. Dutch provides 24-7 access to licensed vets with unlimited virtual visits and follow-ups for up to five pets. You can message a vet at any time and schedule a video visit the same day. Our vets can even prescribe medication for many ailments, and shipping is always free.

With Dutch, you'll get more time with your pets and year-round peace of mind when it comes to their vet care. You're listening to an iHeart Podcast. ♪